Expect rate cuts in 2024, according to experts and the Federal Reserve. Logan Mohtashami of HousingWire comments, “[t]he Federal Reserve played the good grinch for Christmas this year and delivered the best gift for homebuyers nationwide, leading to lower mortgage rates. The 10-year yield and mortgage rates fell together after the Fed meetings, which gave us mortgage rates under 7% last week.”
Rachel Witkowski of Forbes notes that experts believe the Federal Reserve will start to cut rates in the first half of 2024. Projections are that 2024 will end with a Federal Funds rate of 4.6%, down from the current 5.33%. This will be a meaningful relief for those looking to buy or sell a home and will likely spur a more robust spring homebuying season.
Robert Dietz of the National Association of Homebuilders (NAHB) reports on interest rates, highlighting that despite the call to lower rates in 2024, the Fed’s aggressive rate hike cycle will continue to put downward pressure on economic activity in the new year.
“The Fed however missed an opportunity here to cite the outsized role shelter inflation has played in recent CPI reports. The high cost of development and home construction is slowing the fight against inflation. State and local governments could assist the fight against inflation by addressing the root causes of these rising costs.”
Orphe Divounguy of Zillow comments on the cooling interest rate environment, noting that many economic factors point to a continued downward trend for inflation. These include slowing the monthly growth in the core Personal Consumption Expenditures (PCE) index (the Fed’s favorite inflation gauge) and decreasing factory orders.
Source: NAHB (December 2023)